Wild, Wacky, & Weird

No, I am not talking about myself.

Although, if you knew me you might say the same thing! Rather, I am talking about the state of the real estate sales market - It’s a strange world out there. One of the proverbial godfathers of my business, Bob Knakal, said of the market earlier this week, “I am confused. I hope we have more clarity by the end of the year, because I’m no more certain where we’re going than I was at the beginning of the year.” While market conditions can never be boiled down to an exact explanation, here are a few thoughts on why it’s so confusing out there!

1. Closed sales are slower – Q2 reported a 12% decline year over year in signed contracts and 6% decrease year over year in closed sales. There are less people pulling the trigger on buying a home which means demand is waning.

2. (Yet) Inventory is higher - Despite the fact that sales have slowed, inventory ticked up 2% in Q2. Using basic supply and demand logic – if there is more supply and less demand than the market must adjust (lower prices).

3. Prices are still high – Since we can logically conclude that prices must come down, there’s confusion since prices are still high. Clearly a lag exists between the facts (more supply than demand) and the listing prices (what sellers believe their home is worth).

4. Volatility is keeping rates down - Major factors (uncertainties) like Brexit, geopolitics (election season), and macroeconomics (global economy) are keeping the Federal Reserve in a very conservative state. As a result, banks can still offer very low interest rates to the consumer market which keeps people buying.

So what does it all mean? Well, there are two things I know: the real estate sales market is cyclical and interest rates always return to normal rates. While I don’t anticipate another 2008-2009 meltdown, if the combination of an interest rate hike and slowing demand continues, we should settle into a calmer market. So while that may be weird, its been nearly 10 years since we experienced this, weird isn’t always bad. Lets see what happens!